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Africa Urged To Remove Barriers To Regional Trade

by Robert Lee,, London

08 November 2012

African nations are failing to fully recognize the role that freer trade can play in fostering entrepreneurial activity and improving food security, a new report from the World Bank says.

The report warns that trade in food between African nations has consistently declined over the past forty years to record lows, strangled by prohibitive government policies. The report noted that small African farms that export their goods typically receive less than 20% of the consumer price of their products, with the rest eaten away by transaction costs and post-harvest losses. Improving trading conditions could bring development gains, with food accounting for 60-70% of the household expenditure of the region's urban poor, and 45-55% on average outside this demographic, the report says.

The World Bank observed that the fall in cross-border activity had come despite significant headway achieved by these nations in cutting tax barriers to food trade in recent years. The World Bank urged African leaders to re-evaluate their policies to untangle the "web of rules, fees and expensive transportation costs" being faced by traders, highlighting that an extra USD20bn in yearly earnings could be achieved if African leaders can agree to dismantle trade barriers that blunt more regional dynamism.

According to the World Bank's research, traders encounter numerous issues when trading across borders, including: outdated regulations, that particularly inhibit seed trade; lack of competition in the transportation market and poor services; export bans; unnecessary permits and licenses; costly documentation requirements; and standards that rather than facilitating trade often instead create a barrier for small producers.

"Africa has the ability to grow and deliver good quality food to put on the dinner tables of the continent's families," said Makhtar Diop, World Bank Vice President for Africa. "However, this potential is not being realized because farmers face more trade barriers in getting their food to market than anywhere else in the world. Too often borders get in the way of getting food to homes and communities which are struggling with too little to eat."

The report follows recognition from the World Bank that South Africa made the most significant progress globally during 2011/12 in easing the process of trading across borders, as measured by the World Bank's recently released Doing Business report. The World Bank highlighted that improvements in South Africa have had positive effects throughout southern Africa, since overseas goods to and from Botswana, Lesotho, Swaziland and Zimbabwe transit through the nation.

Meanwhile, the report highlights the competitive disadvantage being created by other African nations' burdensome policies. The report identified that a total of 17 documents are needed in the Central African Republic (CAR) to import goods, closely followed by 12 in Cameroon and Niger, and 11 in Chad. Importing goods takes on average 101 days in Chad, 73 in Zimbabwe and 64 in Niger.

Meanwhile, exporters in Congo are required to file 11 documents, while exporters in Cameroon are required to file 10. Exporting in Chad takes 75 days, 59 days in Niger, 54 days in CAR and 53 days in Zimbabwe, substantially pushing up the cost per container of exported goods to untenable levels.

TAGS: Chad | South Africa | compliance | tax | business | tax compliance | Niger | Nigeria | Swaziland | Zimbabwe | tariffs | Ethiopia | Lesotho | fees | food | Botswana | Cameroon | standards | regulation | trade | Europe | Africa

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